Productivity Commission review a ray of hope for major projects


Will the Productivity Commission’s landmark review of Australia’s assessment and approval processes spark a much-needed overhaul of the regime? Many are hoping so. Right now, major projects in Australia are hampered by an inefficient approvals system riddled with duplication and red tape.

Thankfully, reform may be on the horizon with the Productivity Commission commencing a review to identify ways of streamlining the regime. Earlier this month, the Commission published an Issues Paper which sets out the study’s parameters and aims to assist stakeholders in preparing submissions.

The Issues Paper also canvasses potential reforms to some well-known problems. Two such reforms raised for consideration are reducing jurisdictional overlap and increasing the use of “strategic assessments”.

Currently, most major projects must obtain separate approvals from both the Commonwealth Government and the relevant State or Territory Government before proceeding. The resulting duplication between State and Federal processes arguably imposes unnecessary costs and delays on project proponents.

Investors and industry bodies have long been critical of the multi-jurisdictional approvals regime. Recently, the Australian Petroleum Production & Exploration Association went so far as observing that jurisdictional overlap is negatively impacting Australia’s competitiveness.

One potential, albeit controversial, means of addressing this inefficiency would be for the Commonwealth to delegate its approvals function to the States and Territories under so-called “bilateral approval agreements”.  Although we have previously written about this reform option, more recent indications are that the Commonwealth is unwilling to take this approach. 

The Commonwealth did begin negotiations on bilateral approval agreements with the States and Territories, but it became concerned that the States and Territories were not committed to upholding the environmental standards sought by the Commonwealth.  According to the Commonwealth, if the States and Territories refuse to uphold rigorous standards, there is a greater risk that approvals will be challenged, thus creating more uncertainty for industry.

Less controversially, the Issues Paper also raises the idea of expanding the use of strategic assessments as a means of streamlining the regime without jeopardising environmental outcomes.  Ordinarily, projects are assessed individually, which can create significant levels of duplication where, for example, a large number of similar developments occur within a single geographic area.  To streamline this, strategic assessment allows for classes of development to be assessed at a regional level, removing the need for each development to be separately assessed.

Importantly, Dr Allan Hawke’s 2009 review of the Commonwealth’s main environmental assessment Act, the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), also considered that strategic assessment could improve environmental outcomes.  The reason for this is that, by adopting a broader, regional outlook, strategic assessment better enables the cumulative environmental impacts of projects to be considered.

Unfortunately, in practice, strategic assessments don’t seem to be a “silver bullet” for regulatory inefficiencies.  For example, it took the WA state government four years to approve the Browse LNG Precinct’s strategic assessment, after it was submitted in 2008, and the assessment is yet to be approved by the Commonwealth.[1]

Even if no single measure can radically improve the efficiency of assessment and approval processes, the Productivity Commission’s review is a welcome first step towards the Commonwealth obtaining a clearer understanding of Australia’s competitive position and potential reform options.

The Commission conducted a similar study in 2011, comparing the planning, zoning, and assessment approaches of Australia’s States and Territories.

However, this new investigation has a global focus and will benchmark Australia’s processes against both domestic and international best practice.

Major projects are often dependent on international investment for capital.  By comparing Australia’s regime with those of our global competitors, the Productivity Commission aims to identify reform opportunities and also assess whether current processes are impacting Australia’s ability to compete for foreign investment.

Available data certainly suggests the regime’s costs are significant enough to warrant closer investigation.  A 2009 ANU study of the EPBC Act calculated the Act had cost industry around $820 million in its first nine years.[2]  Importantly, that figure did not include the cost to government of administering the Act, or costs relating to projects which had been withdrawn or which were assessed under State or Territory legislation only, so the true cost is likely much higher.

Major project funding is an internationally competitive game and Australia is but one of many attractive investment locations. While most investors understand that assessment and approval processes need to be rigorous, they are unlikely to tolerate duplication and inefficiencies which cost them time and money.

The Productivity Commission will be accepting submissions on the Issues Paper until 25 March 2013. See here for information on how to make a submission.

  [1] S Audeyev and P Ivery, ‘Browse LNG Precinct: A Test for Strategic Assessment’ (2012) 27(9) Australian Environment Review 284.

  [2] A Macintosh (Australian Centre for Environmental Law), The EPBC Survey Project: Preliminary Data Report, 7 September 2009.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Christine Covington

Partner. Sydney
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Louise Camenzuli

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